New overtime rules set to kick in

Longtime issue is a victory for business lobby

WASHINGTON -- In an unprecedented overhaul of the nation's overtime pay rules, the Bush administration is delivering to its business allies an election-year plum they've sought for decades.

The new rules take effect Monday after surviving many efforts by Democrats, labor unions, and worker advocates to block them in Congress and kill them through public and political pressure. The administration and business groups say the old regulations were out of date and confusing, and were sparking multimillion-dollar lawsuits.

The Labor Department says no more than 107,000 workers will lose overtime eligibility from the changes, but about 1.3 million will gain it. But the Economic Policy Institute, a liberal Washington think tank, says 6 million will lose, and only a few will get new rights to premium pay for working more than 40 hours a week.

But no one really knows. That makes the issue harder to demonize politically, a benefit -- or a problem -- depending on the side you take.

''I do not see any kind of rush by employers to take away overtime rights," said Bill Schurgin, a labor attorney for the Seyfarth Shaw law firm in Chicago who represents employers preparing for Monday's change. Critics say charges that 6 million workers will lose eligibility are ''a red herring."

Regardless, ''nobody should get their overtime pay taken away," said Karen Nussbaum, executive director of Working America, an AFL-CIO organization created for workers unable to join unions.

About 115 million workers are covered by the overtime rules in the 1938 Fair Labor Standards Act.

Monday's change is the culmination of decades of lobbying by business groups representing retailers, restaurants, insurance companies, banks, and others that have been hammered by workers' overtime lawsuits, many of them successful.

Wal-Mart is facing dozens of lawsuits by workers alleging they were cheated out of overtime and worked off the clock. An appeals court upheld a $90 million verdict against Farmers Insurance Exchange, sued for overtime by claims adjusters. Other companies that have made multimillion-dollar payouts include Starbucks, Radio Shack, Rite Aid, and Bank of America.

Labor Secretary Elaine Chao told Congress the new rules would help stop ''needless litigation" because they are designed to clarify who's entitled to overtime. Critics say the rules will prompt even more lawsuits.

Chao and department officials are traveling the country touting to employers, human resources officials, and friendly labor unions what now is called the Fair Pay initiative.

''As the new rules become effective, people will come to see that they do exactly what we've said they will do, which is provide a stronger and clearer overtime guarantee for more working Americans," said Deputy Labor Secretary Steven Law. He noted that a judge last month ruled in favor of Geico insurance claims adjusters, citing the pending new rules.

But in a written statement, Senator Edward M. Kennedy, Democrat of Massachusetts, said the new rules would strip overtime protection from millions of workers, including ''nursery school teachers, cooks, nurses, and clerical workers."

''The overtime rule shows once again that the Bush administration favors corporate profits over workers' wages," he said.

Senator Tom Harkin, the Iowa Democrat who led the Senate fight to block the regulations, questioned the Bush administration's motives. ''Let's face it, some of their major supporters in industries covered in here want this change," he said.

After an uproar from Democrats and labor leaders about the proposal and unsuccessful attempts in Congress, with the help of moderate Republicans, to block the plan, the rules were revised. The Fair Pay title was added and estimates of the number of workers affected were cut.

''It's absolutely true that it's been much more of a political issue than it should have been," said Michael Eastman, the US Chamber of Commerce's labor law policy director. ''It's been on the regulatory agenda since the Carter administration. It shouldn't be this controversial."

Union workers covered by contracts will not be affected by the changes. But labor leaders argue that unions will face tougher negotiations when their contracts expire because of the new rules.